FT: Mining becoming the ticket out of Sierra Leone’s poverty
The decade-long civil war in Sierra Leone brought two unforgettable images to the West: victims of violence whose limbs were hacked off by armed rebels as a warning to civilians; and the term “blood diamonds,” referring to the diamonds plucked by hand from alluvial deposits that were smuggled out of the country and used by both sides of the warring factions to fund their vicious campaigns.
While the 11-year civil war that ended in 2002 has ruined the infrastructure and reputation of Sierra Leone, the FT (sub required) reports that things are improving for the impoverished African nation thanks largely to mining.
The IMF is forecasting Sierra Leone’s GDP to grow at a remarkable 34% this year, the paper reports, with two iron ore projects leading the way:
Two iron-ore deposits could deliver an extra $1bn to the $3bn economy. Aim-listed African Minerals said it will export 10m tonnes of iron ore this year out of a total of 12.8bn tonnes at its Tonkolili mine. London Mining, also listed on Aim, plans to export 1.5m tonnes of higher-grade iron ore this year from its Lunsar mine.
Earlier this month, Reuters reported that Koidu Holdings, the owner of the country’s only open-pit diamond mine, is considering a public listing that could raise $400 million for funding an expansion to boost carat production by 20 times to 2.5m carats a year.
The story quotes Koidu CEO Jan Joubert confirming that a possible IPO is under discussion; if it happens, Koidu Holdings would be the first Sierra Leone company ever to go public.
Media reports say the company would likely be floated on the Hong Kong Exchange, where Chinese interest in African diamond mining is high despite the volatility normally associated with it. Koidu would be the first African company to list in Hong Kong.
The Koidu operation produces 10,000 carats per month and sells 60% of its output to Tiffany’s.
Sierra Leone is also hoping to expand beyond mining into other sectors including tourism, deep-sea drilling for oil, and large-scale rubber and rice production, says the FT, which notes the country’s growth prospects can be traced back to peaceful elections in 2007 that brought to power a government led by President Ernest Bai Koroma:
Under President Ernest Bai Koroma, it has increased spending on agriculture from 1.6 per cent to 10 per cent and provided social safety nets including a 25 per cent fuel subsidy. It is tackling power and infrastructure, a problem for residents and investors. Chinese workers are building roads while UK investors may expand a long-stalled hydropower project.
Despite this, FT reports Sierra Leone faces serious challenges including three quarters of the country mired in poverty, inflation running close to 20%, and the threat of cuts to social spending, according to the UN and the IMF.